Centene Corp

NYSE:CNC

Thank you very much for taking time out of your busy schedules to join us today. As it is the scheduled time to begin, we will now start the Sony Group Corporation Fiscal Year 2025 Third Quarter Earnings Announcement. I'll be serving as MC. I'm [ Ishi ] from PR. First, I'd like to introduce the speakers. Representative Corporate Executive Officer, Chairman and CEO, who is to become Representative Corporate Executive Officer and Chairman effective April 1, Kenichiro Yoshida. Current Representative Corporate Executive Officer, President, COO and CFO, to become Representative Corporate Executive Officer, President and CEO on April 1, Hiroki Totoki. Senior Vice President, Corporate Planning and Control, Lead of Group Diversity, Equity and Inclusion, support for financial services business and entertainment area, Naomi Matsuoka. Senior Vice President in charge of Finance and IR, Sadahiko Hayakawa. Corporate Executive Officer and CFO, Sony Financial Group, Kazuhiro Yamada.

First, Mr. Yoshida will say a few words, followed by an explanation of the earnings results for the third quarter of the fiscal year ending March 31, 2025 and the full year forecast by Mr. Totoki, Mr. Hayakawa, Ms. Matsuoka, Mr. Yamada, and then we'll move on to the Q&A session. After the Q&A session, there will be a photo session for the media with Mr. Yoshida and Mr. Totoki. The entire event is scheduled to last about 80 minutes. Mr. Yoshida, please.

Hello, everyone. We recently announced our new management structure effective April 1. Hiroki Totoki will be appointed CEO of Sony Group Corporation. Based on his achievements until now and from the perspective of future long-term growth, I'm convinced that Totoki is ideally equipped to be the next CEO, and the Board is in unanimous agreement. Today, I wanted to take this opportunity to join you and share a few words.

Taking a brief look back since returning to Sony from the ISP So-net together with Totoki in December 2013, I served as CFO for 4 years and then CEO for 7 years. I would like to once again express my gratitude to you all for your feedback, including your encouragement and critical analysis throughout this period.

I believe that Sony was nurtured by the capital markets. During my time as CFO, I often spoke within the company about moving from internal negotiation to external accountability. The aim was to verify the effectiveness of our management initiatives by asking ourselves whether they are explainable. There is a great deal that business leaders can learn from dialogue with the media, analysts and investors, and I myself have learned much. If I were to mention one thing from my 7 years as CEO, it would be our purpose that I defined in my first year. The keyword within this is Kando inherited from my predecessor, Kazuo Hirai. I think of our purpose as a promise. It is a promise that we make to each and every employee.

It is based on the belief that you are the driving force behind Kando. I trust that most Sony Group employees think that it is not Yoshida who achieved something, but rather, we are the ones that did it. And we are the ones that will continue to do it. I believe that this kind of intrinsic strength is vital for connecting our purpose to profit. Going forward, I myself, alongside our employees, intend to be part of the driving force behind Kando and offer my support to Totoki and the new management team. That is all from myself.

With that, I would like to hand over to Totoki.

Thank you very much. I'm Totoki. I'm now assigned as the President, CEO and I look forward to taking over the company, Hirai and Yoshida have greatly added value to CEOs and to working to create new value by realizing our creative entertainment division and driving Sony's evolution and further growth. Now I will explain the contents shown here, and then I will give a general summary at the end.

First, speaker, Hayakawa-san, please.

Thank you. The consolidated sales, excluding the Financial Services segment for the quarter increased 7% compared to the same quarter of the previous fiscal year year-on-year to JPY 3,695.7 billion and operating income increased 10% to JPY 423 billion. Consolidated sales, including Financial Services segment increased 18% year-on-year to JPY 4,409.6 billion. Operating income increased 1%, to JPY 469.3 billion, a record high for the third quarter. And net income increased 3% to JPY 373.7 billion. The results by segment for the quarter are shown here.

Next, I will explain our consolidated results forecast for FY '24. Consolidated sales, excluding the Financial Services segment have been upwardly revised slightly from the previous forecast to JPY 11,900 billion. Operating income has been upwardly revised 2% to JPY 1,190 billion, and operating cash flow has been upwardly revised 15%, mainly due to the improvements in working capital to JPY 1,660 billion.

Consolidated sales, including the Financial Services segment have been upwardly revised 4% from the previous forecast to JPY 13,200 billion. Operating income has been upwardly revised 2% to JPY 1,335 billion, and net income has been upwardly revised 10% to JPY 1,080 billion. The full year forecast by segment is shown here.

Now I will move on to an explanation of this state of each business. The first is the Games and Network Services. Sales for the quarter increased 16% year-on-year to JPY 1,682.3 billion, primarily due to the increased sales of hardware and third-party software. Although we had a big hit of Marvel's Spider-Man 2 in the same quarter of the previous fiscal year, operating come increased 37% year-on-year to JPY 118.1 billion, a record high for the third quarter in the segment, primarily due to the impact of higher revenue from Network Services and third-party software as well as improved profitability of hardware.

Promotion expenses per unit of PlayStation 5, on which the promotion was implemented in the current quarter decreased approximately 20% year-on-year, and we think that we are implementing an optimal sales program given the market environment. We are managing PS5 inventory at an appropriate level with inventory at the end of December, decreasing 46%, compared to the same month of the previous year, significantly contributing to an improvement in cash flow.

Taking into account the result of the quarter, we have revised upward our full year forecast for sales by 3% to JPY 4,610 billion and operating income by 7% to JPY 380 billion compared with our previous forecast. The number of monthly active users MAUs across PlayStation platforms in December increased 5% compared to the same month of the previous year, reaching 129 million accounts, the highest number in PS history. Total play time also increased 2% year-on-year, marking the seventh consecutive quarter of year-on-year growth. More than 40% of users who purchased the PS5 during the quarter were new users. Combined with a moderation in the decrease in the number of PS4 active users, this has contributed substantially to the increase of MAUs.

Cumulative unit sales of PS5 from the launch until the end of December, essentially the same level as the cumulative unit sales of PS4 for the same period of time since launch, even though PS5 had a higher price. Furthermore, MAUs after the same amount of time has passed this launch have increased significantly by approximately 1.4x. This shows that the user base for the PS platform has significantly expanded from PS4 generation due to the PS5's backward compatibility in various user engagement initiatives. As for PlayStation Plus revenue in the quarter increased 20% year-on-year on a U.S. dollar basis, primarily due to an increase in average revenue per user, ARPU mainly due to a shift to higher tiers of service and the impact of price revisions. In this way, in the momentum of the platform business is currently strong, and we expect to see stable earnings growth going forward.

Last November, we released a better version of a cloud streaming feature on the PS Portal Remote Player. This means that PS Plus premium subscribers can now play over 120 PS5 game titles on the PS portal stream directly from cloud service without going through PS5 console. By leveraging the lessons from the beta test, we aim to further improve the streaming and gaming user experience, so users can enjoy PS games anytime, anywhere and even more easily. The Game Awards 2024 held on December 13, 2024. Our first-party title Astro Bot won 4 categories, including Game of the Year and Best Family Game, the most of any title. In addition, the live service game, Helldivers 2 released in February last year won the Best Ongoing Game and Best Multiplayer Game awards.

The fact that titles in general, we are aiming to expand in the future, including titles for families and live service games have received these awards is a major stride towards building a broader title portfolio. In addition to the awards, it received Helldivers 2 large update Omens of Tyranny released in December 2024 has been well received and user engagement has once again increased significantly. Next fiscal year, we plan to release games such as the major title Ghost of Yotei and sequel to the popular title Death Stranding and we expect even further expansion in earnings from first-party software.

Next is the Music segment. Sales for the quarter increased 14% year-on-year to JPY 481.7 billion, primarily due to higher streaming revenue and the impact of the consolidation of ePlus Inc. in visual, media and platform. Operating income increased 28% year-on-year to JPY 97.4 billion mainly due to the impact of the increased sales. On a U.S. dollar basis, streaming revenues for the quarter increased 9% year-on-year, including a onetime factor in recorded music and 8% year-on-year in Music Publishing. We have revised upward our full year forecast for sales by 3% to JPY 1,790 billion and operating income by 3% to JPY 340 billion. During the quarter, new albums from artists such as Tyler, The Creator and [indiscernible] became hits. Recently, Bad Bunny's new album released from Rimas Entertainment on January 5, 2025, has become a huge hit, capturing #1 on the Billboard 200 and making him the fastest male artist to reach 1 billion streams on Spotify.

At the 67th Grammy Awards held on February 2, 2025, Beyoncé's Cowboy Carter won the award for Album of the Year. Beyoncé, who has been nominated for 99 Grammys over the course of her career, the most of any artist was nominated in 11 categories this time, and she won 3 categories, including Album of the Year. The rise of streaming is creating more opportunities for music from local artists to become global hits. The Sony Music Group is working to enhance local repertoire by discovering and nurturing artists and songwriters at its locations in emerging markets as well as by building and strengthening relationships with independent labels and artists in various regions through the Orchard and AWAL.

In addition, in rapidly growing Latin America and India, we have further solidified our leading positions through strategic investments in leading labels and music catalogs in each region such as Som Livre in Brazil, Rimas in Puerto Rico and Eros in India. Furthermore, in countries and territories that are expected to grow over the midterm, we have acquired leading local labels in Greece and in the Czech Republic and Sony Music Publishing has established a base in Thailand.

Next is the Pictures segment. Sales for the quarter increased 9% year-on-year to JPY 398.2 billion, primarily due to higher revenue from theatrical releases such as Venom: The Last Dance and the impact of foreign exchange rates. Operating income decreased 18% year-on-year to JPY 34 billion, primarily due to an increase in marketing costs for theatrical releases. The full year forecast is unchanged from the previous forecast. At this point in time, we expect the impact on the results of the segment from the wildfires in California in the U.S. to be minor. In Motion Pictures, there is still some impact of the strikes such as postponement to the fiscal year ending March 31, 2027, of the theatrical releases of the next Spider-Man and Jumanji movies. However, production activity is recovering. In television productions, the production of new shows, which was impacted by the strikes has almost stabilized. At Crunchyroll, streaming of the second season of the anime series, Solo Leveling produced by Aniplex began last month, and it has become a huge hit in many countries and territories.

Additionally, going forward, we aim to further strengthen our engagement with anime fans around the world, including through the scheduled release of Crunchyroll Manga, a digital comic service for paid subscribers in North America.

Now I'd like to explain our strategic collaboration with Kadokawa, which spans our 3 entertainment businesses. We have collaborated with Kadokawa on various projects in the past, but following the conclusion of a capital and business alliance agreement in December and the assumption of a third-party allotment of new shares in January, we have become its largest shareholder. Through this alliance, the leadership of both companies are even more committed to promoting collaboration, and we aim to create new value in various entertainment fields by combining Kadokawa's strength in creating original IP with our technologies and global expansion capabilities.

Next is the ET&S segment. Sales for the quarter decreased 4% year-on-year to JPY 704.5 billion, primarily due to a decrease in unit sales of televisions, while operating income remained essentially flat at JPY 77.1 billion. The full year forecast is unchanged from the previous forecast. The year-end selling season trended generally as expected across the segment. Compared to the year-end selling season of the previous fiscal year, sales of televisions and smartphones, which are not pursuing scale and are focused on high value-added products decreased, but sales in other categories were essentially flat. Even the imaging market, where there were concerns of a slowdown, particularly in China, remained relatively stable and the market scale on a unit basis for the quarter increased slightly year-on-year as was the case in the second quarter.

The sales and profit in our Imaging business decreased slightly year-on-year. We think this was mainly due to our launching 2 new products in the volume zone of full-frame cameras, including the Alpha 7C Mark II in the same quarter of the previous fiscal year. Inventory as of the end of December for the entire segment increased slightly from the same month of the previous year, to JPY 350 billion. It is being controlled at an appropriate level. Assuming that the operating environment in this segment will remain severe into next fiscal year and beyond, we intend to implement further fixed cost reduction measures in the fourth quarter in order to increase resilience and strengthen our profit structure. Expenses for this are reflected in the current forecast.

Since 2012, the market for interchangeable lens digital cameras has seen the single lens reflex camera market shrink at a faster rate than the growth of the mirrorless camera market, which is driven by Sony. As a result, the market as a whole continued its trend towards shrinkage until 2020 when the COVID-19 pandemic was also a factor. However, since 2020, the market has entered a stable re-expansion phase. And by 2024, it recovered to a level approaching the peak in 2012 on sales amount basis.

In addition, the interchangeable lens market is continuing to grow steadily with the combined market size for cameras and lenses exceeding JPY 1,200 billion in 2024. Since the imaging market has a limited number of players because it requires the integration of multiple advanced technologies such as optics, mechatronics and image processing. And since we have image sensors and 5G communications technology, we expect to generate high market share and profitability by continuing to offer products that meet the needs of creators. In addition to the stable sales growth of camera bodies, the creation of new markets and a business where recurring revenue can be expected are steadily expanding with the launch of a variety of lenses that expand the possibilities for creators' expression and solutions and services that add value through software.

Next is I&SS segment. Sales for the quarter were essentially flat year-on-year at JPY 500.9 billion, primarily due to a decrease in sales of mobile image sensors offsetting the impact of foreign exchange rates. Despite the positive impact of foreign exchange rates, operating income decreased 2% year-on-year to JPY 97.5 billion, primarily due to increased manufacturing costs and the impact of the decreased sales. We have slightly increased the full year sales forecast from the previous forecast to JPY 1,790 billion, while the forecast for operating income is unchanged. The global smartphone market continued to slowly recover during the quarter, and mobile sensor sales were essentially in line with our expectations.

Sales for the current quarter decreased year-on-year, primarily due to a shift in sales from the second to the third quarter in the previous fiscal year, resulting from the production yield issue on new mobile sensor products. However, cumulative sales for the 9 months through the third quarter increased a significant 15% compared to the same period of the previous fiscal year. Furthermore, the production yields on the same products during the current quarter improved beyond the initial plan in the forecast as of November, reaching nearly normal levels. The average annual growth rate for the mobile sensor sales from the fiscal year ended March 31, 2022, to the fiscal year ending March 31, 2025, is expected to be 23% on a yen basis and 11% on a U.S. dollar basis. This steady growth is mainly due to rising unit prices resulting from larger sensor rises and higher value-added mobiles. And we believe that we can achieve similar level of sales growth on a U.S. dollar basis in the fiscal year ending March 31, 2026.

Regarding automotive sensors, the slowdown in the growth of the electric vehicle market, especially in the U.S. and Europe, has an impact, but our expansion of our customer base and improvement in our product performance to date have been successful and the strong demand for EV manufacturing in China as well as shift towards higher pixel count sensors have expanded our business. Although the proportion of automotive sensor sales to our overall segment sales is small, we expect high growth going forward.

Now I would like to explain our response to U.S. tariff policy. In order to respond to various geographical risk in our G&NS, ET&S and I&SS segment, which handle hardware over the past few years, we have been working to duplicate our supply chains and increase their flexibility. Furthermore, we have been preparing recently by doing such things as stockpiling a certain level of strategic inventory in the U.S., and we expect the impact on our -- the financial performance this year of the additional U.S. import tariffs that have been implemented or whose considerations has been announced at this point in time is minor to be minor. We intend to continue to respond flexibly and promptly to changing circumstances and implement at the appropriate time, additional measures that we are preparing in order to minimize the impact to our business and the earnings.

Last is the Financial Services segment. Financial Service revenue for the quarter increased JPY 406.7 billion year-on-year to JPY 718.5 billion, primarily due to an increase in gains on investment at Sony Life. Operating income decreased JPY 30.9 billion year-on-year to JPY 46.4 billion, primarily due to the absence of significant gains related to market fluctuation recorded in the same quarter of the previous fiscal year at Sony Life.

Insurance service results, which indicate the earnings potential of Sony Life decreased 11% year-on-year during the current quarter to JPY 41.3 billion, but they trended in a stable manner for the 9 months through the third quarter, decreasing 4% compared to the same period of the previous fiscal year. Moreover, Sony Life's new policy amount for the current fiscal year is increasing smoothly at 12% year-on-year on a cumulative basis through the third quarter. Taking into account the results of the quarter, we have increased the full fiscal year forecast for Financial Services revenue JPY 390 billion to JPY 1,300 billion. The operating income forecast remains unchanged from the previous forecast.

I will now speak about the financial initiatives. At Sony Life, assets, such as bonds held on the balance sheet, exceed insurance liabilities, resulting in an overhead situation. This situation means that rising interest rate will result in a decrease in net assets. So we are working to mitigate the situation this fiscal year. Specifically, we began selling a portion of the bonds we hold and trading derivatives through the third quarter, and we are considering selling additional bonds in the fourth quarter. The full year results forecast incorporates the offsetting the losses from these bond sales on the upside to profit from the market fluctuations through the time the current forecast was determined.

Through those -- these efforts, we intend to continue to steadily improve our financial position while closely monitoring the balance with the profitability, preparing for the partial spin-off and listing of Sony Financial Group, Inc. scheduled for October this year are progressing smoothly, and we plan to explain our business strategy and listing structure in late May.

In closing, I will make some remarks. Having completed the third quarter of the fiscal year ending March 31, 2025, the first year of our fifth mid-range plan, we believe we are making steady progress toward achieving our key performance indicators for the Sony Group set out in the plan -- in our plan. In particular, we view it as positively that G&NS and I&SS, which are driving the profit growth have both been able to significantly increase the profit since the last fiscal year. Furthermore, in regard to the enhancement of shareholder returns, which we are pursuing in our fifth mid-range plan, we completed the repurchase of the maximum JPY 250 billion of our own share decided in May of last year by November. So today, we have established a new facility to repurchase maximum JPY 50 billion with the deadline of May of this year. We intend to continue to implement repurchase opportunities taking into account the state of such things as share price level and these investment opportunities. That's all for me.

So therefore, speakers have given the financial results.

Now we'd like to entertain questions from the media and then followed by the Q&A by the analysts and investors and 20 minutes for each the Q&A session. [Operator Instructions]

And as to the way of questions, we have given you some information beforehand. The first, we would like to entertain questions from the media members and some people participating online, please click button for hand-raising on Webex screen. [Operator Instructions]

The person in the front row of the central block, please start asking the question.

I have 2 questions. First question is about the fact that Yoshida-san [indiscernible] and the other one for Totoki-san. Yoshida-san has assumed the position of CEO 7 years ago and many M&As were implemented by Mr. Yoshida and financial service was decided to be split to a certain extent. So how do you evaluate the progress state of this business portfolio structure? And the second one is the future -- for Yoshida-san and Totoki-san each. As a Chairman that in Sony, what kind of role we like to play within Sony? And maybe your future career plan or ideas in the future. To Totoki-san, I have a sort of abstract question. That is to say, as a CEO of the company, what do you like to achieve in the mid-range plan, there are the numbers of targets. But beyond that, what kind of company that you would like to nurture the Sony to become, so your ambition sort of about the future of Sony?

Thank you for your 2 parts of questions. As to the first part of the question, of course, you told us about the portfolio or how specifically I evaluate and assess that. Thanks for the question. As to the portfolio, the management, well, 2021, the Sony Group company was launched. And so that was a key point. And there are 2 purposes for that. One is the group synergy has to be promoted further. And second purpose is a portfolio management should be done more carefully and perfectly well thought, and there's a progress achieved. But Totoki-san will play the central role, including other members, the leaders to consider and polish this further. My future role as a Chairperson, of course, that I would like to support the Totoki-san's team. That's all from me. My future aim and ambition in the future.

Yes. At CES, about the Entertainment division, I already told you about this. But the way -- the ideal state that we'd like to achieve 10 years from now, that is the ideal state we'd like to achieve against the vision, to what extent can we make progress. And that's a challenging thing that I would like to aim at to get as close as possible to the vision.

What are the most important driver? Of course, the human resource diversity we have and business diversity we have. We have diverse human resources and human business sections. And then by merging that, we can create something brand new. I believe in that. And I would like to really try that and then achieve this vision. So that is the strongest wish I would like to achieve. Thank you.

Let's move on to the next question. The first row in this block.

From [ Toyo Keizai ] I have 2 questions as well. So based on Totoki-san's answer, well, there's some overlap with that. But in 2018, when you assumed the post in -- Yoshida-san, we have diverse people and diverse business and you said the issue is, can you make the best use of that? So selection and focus is something that many companies have pursued. But in management, aiming for diversity, what does that mean? What's the significance of that and significance of what you have achieved? That's my first question.

So second question goes to Mr. Totoki. So President, CEO and CFO to -- President, COO, CFO to President and CEO. So now I think you are moving from execution to management. So what do you think is going to be the difference in your role -- change in your role? And you have now the business CEO or Chief Officer. What's the significance of that new post that you're going to establish?

So making use of diversity. Well, in the 20th century already, we think that we have generated 2 major businesses that we capitalize on diversity. One is PlayStation game business. So music and electronics synergy was what led to that. And then the other one, anime. In the middle of 1990s, the current Aniplex. So Sony Pictures Japan and Sony Music, there was synergy between those 2 that led to that. And so under Totoki's leadership, anime and games, I mean, they're very close. So that will be the engagement platform. So the diversity that we have, we're going to try to convert that more to value. That's the action that he's taking. That's how I see it. So for myself, so to become CEO, my thoughts on that.

So I'm going to be the Chief Executive Officer. So person responsible of management of the company. So I feel that a big responsibility, Hirai-san and Mr. Yoshida, they have created this value. I want to further expand on that, make it bigger. So I have that strong determination to achieve that. That's what I'd like to tell you. And the significance of having Chief Officer. So at the head office, as much as possible, we want to simplify the layers. So we want to do delayering. So we have a transparent and open and efficient and lean head office. So that's what we intend. And so for that, we did this reorganization.

And also one more thing about the name. Well, as much as possible, we wanted something that is easy to understand, not just in Japan, but globally because we have a lot of business overseas. It's much -- it's larger than Japan. So we wanted a title that's easy to understand globally. So that's why we changed the name. And in terms of business CEO, the current business, what drives that is CEO and each business segment. And so for the business segments, we wanted to show the respect and the support from the head office. And we wanted to show how we're going to provide the support and how we're going to behave. So that is why we established this business CEO.

So now we would like to move on to the next question. So in the middle, the white jacket, the person in white jacket, please.

[ Nishigata ] from NHK. And my question is to -- 2 questions to Totoki-san. From April, you will become CEO. And under such circumstances, your company has grown significantly over the last years. But what do you think is a challenge still ahead of you? And how you would like to take that challenge? And so in MLP, JPY 1.8 trillion for the growth -- the investment. So as a CEO, what is your policy for investment to the extent that you can disclose to us? Thank you.

So let me answer 2 questions. What is still lacking? What is the challenge? There are many, as a matter of fact. And of course, there is no company or organization where there is no challenge. And -- but roughly speaking, on our part, we have to play the game globally. That is the nature of our company. So for the -- compared to top-notch player globally in terms of scale or in terms of profitability, we have not reached the top level yet. And therefore, whether we are in a top position globally, there are still many things which need to be improved. Our headquarters in Japan, and there are many Japanese in headquarters. And so in order to make it truly global, I believe that is very important for us to change.

And the second point is with regard to the strategic investment during the mid-range plan and how we should proceed with that. And the policy of investment has not -- will not be significantly different from what we have had. And for the company, for asset, whether we have a capability to boost the value. And of course, we have the great companies or we have a great asset. And it is important, the strategy to acquire them. But the point is whether we are able to further add value through those acquisitions. And the second point is whether we are able to set the price properly and whether we have capability to evaluate the capability and set the price based on that. I think those are very important 2 points.

We'd like to entertain next question. Central Block in the second row and the person wearing a brown jacket, please.

[ Nishida ] the freelance reporter. I have 2 questions. First point that the questions and request to Mr. Yoshida. So far, your investment plan was presented and Totoki-san also covered that too. As a CEO of the company, you have prepared the investment plan. Which one do you evaluate high? And then the second question is to Mr. Totoki. As of now, that in your management portfolio, there are some things which are going well, but some things were negative areas. In some cases, some you must decide to divest or you might make a big change of restructuring, you might have to make that difficult decision as well. But by when do you make such a bold decision? And in which way you intend to do that? At present, I'd like to hear what you think about those.

Thank you for your question. About the investment plan, I highly appreciate the certain area. Well, the most impressive investment for me was for me or for Sony's management is that was in 2018, EMI Music Publishing, the acquisition. That acquisition was most impressive to me. $4 billion investment was made. But anyway, the negotiation was mostly done by Mr. Totoki personally. The music of course, is the original starting point for Sony company. Name Sony came from the Latin world, "sonus" featuring sound and tape recorder and Walkman and CD, -- those were the products we developed. Sound was a basis, origin to deliver sound. That's how we developed the products. On the other hand, CVS Sony created in 1968. And then that is where we got closer to artists, how to get closer to artists and we learned that. In 2018, EMI Music Publishing, the acquisition, and that was like M&A based upon our origin. And then -- from then on, of course, for creation shift or entertainment focused activity was developed and we made a big bold decision from that time on, I think.

And to respond to your second question, how do I evaluate the current portfolio? Well, -- for me, for some time, when I look at the portfolio, it's not static, it's more dynamic. That's how I perceive the portfolio structure. It's not something you implement something suddenly on one day. It's a continuous effort continuously monitor. So for the entire portfolio. Some area might not be doing well in certain segment, you might need to make a bold change. Then without hesitation, I implement that change. But as to the bold restructure portfolio in October, we make a decision on the spin-off of financial segment. And when we announced that thing on financial sector, I explained the person who will be [ spinned ] off or who would spin off, both sides understand that it's necessary spin-off for the future growth. As to the portfolio, as to the major restructuring might be the basic criteria for decision-making.

In other words, if we should keep holding that, that nurture more growth or maybe the other people should manage and then that segment might grow better, then we have to revise drastically. So to that kind of goals or criteria, if we do nothing, then investors might scrutinize and they might come to some critical comments as well if we do nothing. So if possible, we ourselves, of course, would like to make decision. and to take an action in advance and take a proactive action, which is more ideal. So that kind of revision -- restructuring continues to be considered and implemented.

Next question. To the far right, second from the front, the person in black, please.

[indiscernible] from Bloomberg. Question to Totoki-san. Two questions. So about responding to additional tariffs, you said you have strategic inventory that you're building up. Any other measures? In November, you talked about how to do the shipment, you might change where things are produced and you might have a price pass-through. You have to organize those ideas you said. Any products where you actually implemented those ideas? That's one question.

Then the other. So this is something I wanted to ask based on what you said. So in order to compete globally, headquarter shift that to someplace else other than Japan. Do you have such an idea?

So first question, in terms of responding to tariffs, as I said the other day, so I think we have those choices that I explained. So we are making preparations. We haven't made drastic changes in terms of how we respond. Second, about placing the headquarters outside of Japan. That possibility is nil. We have no such idea. Tokyo is a really nice place. So we don't feel any inconvenience. So I think it will stay the same.

Time becomes short. So the next session will be the last question. The person in gray at the suit, please.

[ Tanaka ] from Asahi. And my question is to Yoshida-san, 2 questions. And Mr. Yoshida, in 2013, when you returned from So-net to Sony, and when you returned to Sony, there was a deficit and the management was not necessarily very healthy. And so as a CFO, for instance, the sale of Vaio and you have to reduce the number of employees. I think you were involved in restructuring of Sony then. And at that point, what was your thought to make those decisions? And the restructuring, I'm sure that, that has led to the current the growth phase. So when you look back at the situation then, how do you reflect your action of restructuring then?

And the second is when you were CEO, you tried to put emphasis on entertainment area. So looking from outside, Sony has changed significantly. So as CEO, what is your impression about what you have achieved?

Thank you. Since I'm appointed, let me answer. When I returned from So-net, it was December 2013, I returned to Sony with Totoki-san. In the early phase after I returned, I decided to withdraw from PC Vaio and also decided to spin off TV to separate business of TV. And I made proposal to both together with Totoki-san. And I think it is common between us that the basic mindset then was that -- and we are not happy to be MA'ed by Sony. But of course, the Sony took care of us. So we wanted to contribute to Sony. We are indebted to Sony very much. So after impediment, there was a lot of efforts for that. And so the Totoki-san was in charge of mobile business, he was involved in restructuring, and that the improvement has led to the current growth. When I was CEO, of course, entertainment was emphasized and Sony has changed. Thank you very much for your comment.

And the focusing on entertainment, itself is related to Kando that was put forth by the Hirai-san, my predecessor in 2012. And I fully agree with him. It was old story, 2005. When I became the President of Sonet, Sony Communication Network was the original name, but I changed it to Sonet Entertainment. And my thinking then was in 21st century, that was the era of entertainment. And the major bearer of that trend is -- was network. So I took challenge together with Totoki-san for that purpose. So -- the focus on entertainment, I fully agree with Hirai-san then that was the background. Whether I have fully achieved my purpose, of course, there are still challenges that are left, and we have to continue to take. So I would like to continue to support Totoki-san, who will take leadership in doing so.

So we would like to end this part of this Q&A session by media. Thank you. We would like to entertain questions from the analysts and investors. I would like to serve as the MC and Kando of IR Group. Thank you very much in advance. [Operator Instructions]

To the right-hand side, second row, please, the person is now designated.

Junya Ayada of JPMorgan. I have 2 parts of questions. I have a question about the financial results in the third quarter, the game and network businesses and let me just reflect upon that. Of course, active users made a record high increase so marked in this quarter. What's the driving force for such an increase of these users? Hardware console is selling well and third-party software titles are selling well and add-on also increasing. So everything is growing. But especially in this fourth quarter, what was the major driving force? And is this a sustainable growth? What do you think of that? That's my first part of the question.

My second part of the question is to Mr. Yoshida. Sony management human capital, human resources is my question in the last decade, you have went through the major reform, Mr. Hirai, Mr. Yoshida, Mr. Totoki and each played a role and maybe they reflected just the business environment and era as well. But 3 of you played a certain role. But in one word, what was the role of each top management. In the capital market in the future, 10 years from now on that in order to create a further better Sony, those 3 CEOs have maybe nurtured and developed the future generation of management human resources. What do you think of that? Have you developed and trained the future CEOs?

I'd like to answer the first question first. That is as of the third quarter, as you're aware, that there's a seasonality influence. So that the figure should go up most at that season. So at that timing, we are fortunate that the consoles really sold well. There was a major influence of good sales of consoles more than we had expected. Much stronger momentum was felt. In addition to that good news, high-quality third-party software titles were available launched during the third quarter. There was a synergy in MAU was achieved the highest in record. So there's a seasonal fluctuation. So in the fourth quarter, it might come down again. But still, overall speaking, it's a continuous growth that is ideal state of growth. So we'd like to continue this momentum. As to the hardware, we have achieved a high level of penetration. For the next fiscal year, very strong, the titles, including first-party and third-party titles are likely to be launched. So the better momentum could be created for us to boost our sales for the next fiscal term. Thank you.

So let me respond. In the last 10 years through the major reform, Mr. Hirai, myself and Totoki-san played a certain role for -- during each term. Of course, Mr. Hirai launched the world Kando. That is entertainment focused approach, I think. And I worked together with Mr. Totoki. So in the last 7 years, especially the creation shift was focus of mine. We should shift to creation. Content creation is one area. However, hardware-wise, camera, the capturing should be also focused and also component and parts, battery is where we exited already, but semiconductor is related to capturing creation. So we should focus on semiconductor as well. So we shifted to creation. And there's a committee of interest used internally that we'd like to close -- get closer to the certain motivation of the users so that the core gamers, we should get closer to them and anime, we should focus on anime as well. And that, I think, was a focus of this present management.

But what about the future, there are many ways to describe it. Mr. Totoki last year in May, represented that creative entertainment vision was launched by him last year in May, which exemplifies that technology should be continuously treasured, especially computing and sensing should be emphasized -- continue to be emphasized. So I expect that to be the focus. As to the human resource training, as Mr. Hirai and Totoki, we had lots of experiences in Sony. One point I'd like to raise an example. I personally as the PlayStation it linked the 20th century -- 21st century of Sony. In other words, it was a packet measure of the last century. But now it shifted to and self-transformed to this network one.

I often say internally that how did we achieve this self change? That is network split. Sony Network Entertainment was created in 2010 and network systems separated. And then again, in 2016, again, they were remerged, integrated. Then Sony Computer Entertainment became a Sony Interactive Entertainment. So the name was changed. So people are now connected by networking. And in addition, the people in the earlier organization, the 3 people, Kodera, Nishino and these 3 and [ Nito ] these 3 people are the members. Those 3 had experience, and they became a supporter of the team Totoki. They are the major members supporting Mr. Totoki. So it's one of the good examples I could cite -- quote.

Moving on to the next question. From the stage to the left, third row from the front, wearing a black jacket, please.

Nakane from Mizuho Securities. Sorry for my voice. So question -- same question to Yoshida-san and Totoki-san. So before it became the group, you had split the TV subsidiary. So between group headquarters and the business, you have separated. So I think that's been your management style. So in terms of business management and decision-making, your involvement in each of the business, what would that be? So Director of the business and as a shareholder, as a group CEO, I mean you have various positions. And so there is a centrifugal and centripetal power. So how do you strike a balance between the 2? I mean it's easier said than done. So inclusive of the message to the future, what were the difficulties that you had or what thought process you went through? So sorry for the abstract question. So Totoki-san, you worked on mobile and games and you went into the businesses. I think you're that type of manager, but now you're Group CEO. And so how to engage in each businesses? How is that going to be different from Yoshida-san? Is there going to be a difference? Please tell me.

So first question, let me talk about that. So in terms of group management, as you rightly pointed out, so I think you need both the centrifugal and centripetal force. You need both. And I think the crux of that, both -- for both is purpose, I think. So it's not -- I said that it's not that Yoshida did something. I want the employees to think that we did it, and they actually feel that way. And of course, management responsibility is to connect the purpose to profit. But in doing that, I think that is quite important. And so there's a purpose, which is our promise. And so centrifugal, centripetal force, striking a balance between the 2 is what I have been working on. So maybe a little bit abstract response.

But even now, myself as an individual, I enjoyed working on business hands-on. Even if it's difficult, I enjoy that process. So what -- so in more cases, I recall those hands-on experiences. But having experienced both, what I feel is that, I mean, we're going to have to decide how and what do we support in the businesses. So some things you have to do and some things unnecessary things you not do, both are important. And so that is all about creating the balance between centrifugal and centripetal power. And so -- so I want to provide this thorough care from the management. So I want to think what is the best way to do that. So when things are going well, I try not to interfere. That is the style I would like to adopt.

So now we'd like to move on to the next question. SMBC Nikko, Katsura-san, who joined online, please.

Katsura from SMBC Securities. I have 2 questions. And the first is the business related. And the G&NS and I&SS have made a very good start this fiscal year. And on the other hand, at the market, we are worried about sustainability. So the many -- the response is what will happen to the next fiscal year. So since this fiscal year is very good, there will be dip next year. That is a concern. So you said the many things about upside. But G&NS and I&SS, the FY '25, what are the upsides and the downsides.

And the second, the question is to lead the mid- to long range, the plan. So for the new organization, you have already shared that with us. And with regard to the personnel, you have already covered it. And you mentioned the diversity and returning to the younger generation. And so next generation, the talents to take care of the management, what is your expectation to them? And at the very beginning, Yoshida-san said that Sony has been nurtured by capital market. And what is your expectation towards vis-a-vis capital market? If there are any, please share them with us.

So answering your first question, let me answer your first question. So you talked about sustainability of the profit for the game and I&SS and what will happen to the next fiscal year. And as for game area, rather than sell-through of console now, the MAU has been accumulated, network service plays a main role. So even though there is a higher profit, there will not be the rapid dip. And as for the next fiscal year, first party, third party, we expect very good titles coming out. So that is a good year. So we have a high expectation for the performance of the next fiscal year.

So we would like to take advantage of those opportunities without missing them. And as for I&SS, through the larger size, the sensor, we will continue to have the high sales. And by the end of this fiscal year, we'll solve the issues related to yield. So there will not be the major concerns for the next fiscal year. But smartphone, the market itself, what will evolve in that market. So that is a market which has been reaching maturity, but there is AI feature newly incorporated and whether that will vitalize the smartphone market. I think that is a very important point affecting our business. That's all. Thank you.

So the new management team under the leadership of Totoki-san, I expect a great deal. And what we expect vis-a-vis the capital market was your question. So I have had opportunities, the stakeholders, the clients, partners, shareholders, clients. So with those contacts, that has made me think that for our customers and employees, they have focused on a certain area as their expectations for employees. Now of course, they would like to improve the careers and compensation. And when you face the capital market, I feel strongly the wide bits of dynamic range of the expectation. You talked about the diversity. But of course, investors have different time frame. And so whether they wish to focus or they accept the portfolio offered by management, there is a difference. So there is a wide dynamic range of the requests and expectations of the market that we can learn from them.

So may I answer that question? The next generation, the management in terms of talents, what I expect from them?

So we have come to Internet native generation gradually. And so they have been exposed to the Internet since their younger days. So they will be the main -- the people to support Sony's management. So the sense of the speed and the capability to find something new and limited and very little the resistance to technology. I believe those mindset and attitude will generate something new. AI will be widely penetrated and the next generation is able to handle them very easily. And I have very high expectation, not only the service and products, the way of the working and the management style will change. And that is how I sense the sign of change. And I would like to support and I would like to support those changes actively. Thank you.

Time is running short. So we'd like to ask just one question per person from now on. Thank you for your kind understanding. [Operator Instructions]

Online participant from Citigroup Securities, Ezawa-san, please.

I'm Ezawa of Citigroup. I have just one question. Totoki-san mentioned about the mid-range plan and then 10% profit increase is planned in the scenario in the last 9 months, the growth rate you super-achieved -- overachieved like 23% increase of profit achieved already. So you overachieved. So after the revised annual plan, in the fourth quarter, there might be some expense to be made like 10% increase might be in the scenario. But clearly, you are overachieving the original target. 10% growth scenario versus now, you might have maybe a different actual performance than the original plan. Is that something that just happened incidentally? Or you already knew and expected that you will overachieve. That's why you may come up -- you might have come up with a more conservative forecast or outlook. Could you please reflect upon that? And if the current growth was not coincidence, but it was a continuous sustainable growth, high growth that you are really continuously achieving, then your mid-range plan needs to be maybe updated more frequently or quickly. What do you think of that?

Thank you for your question. As you're aware, it's a mid-range business plan, the span is 3 years. So this is just the first year. And -- so updating or maybe it's premature in terms of timing to update. Then we scrutinize outside the environment, there are lots of factors of uncertainty. So in 3 years, we would like to achieve something we had promised to do. Every year, there is maybe fluctuation, maybe the speed of implementation might be expedited or slowed down. It's inevitable because ForEx is also one impact. So tailwind is something we have to make use of. Against the risks, we should be sensitively and quickly cope with. So as much as possible, we would like to achieve a stable growth. Thank you.

This will be the final question. Third row from the front, from the stage to the left-hand side. person with a beige jacket, please.

Nishimura. And one question from Okasan Securities. We talked about competing on the global stage. That's what you want to do. You're going to make an effort for that. And so going forward, what about M&A? So is it going to be bigger than before? Are you going to be more aggressive than before about M&A? And also internally, you said that there are various issues. So to resolve those issues and to enhance profitability in each business, what potential do you have for growth? And how are you seeing the progress?

Well, to compete at a global level, well, does it lead to bigger M&A? It's not synonymous. So we have to find the appropriate opportunity. And as I said, has to meet our criteria. If there are those that meet our criteria, we'd like to study them and act on them.

And in terms of solving internal issues, how much room do you have for growth based on solving those issues? What my focus in management would be how much growth and profitability can we expect in each business. And so in terms of our competitive positioning, the trends of the competitors and the market growth. So based on that, we can set the goal of this is how far we should be able to go. And if we -- if we fall short of that, we should discuss what is it that's lacking, we should find that out and then try to bring reality closer to ideal. I think it's just an iterative process of that. So for all of the segments, there's not going to be uniform profitability or growth expectations for each business is an ideal situation, and we want to think together how we can approach that, come closer to that. That's all.

With that, we'd like to close Sony Group Corporation consolidated financial results presentation. And the photo session to follow will be for the media. So investors, analysts, please leave the room. Thank you so much for joining us today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]